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SECURITIES AND EXCHANGE COMMISSION

FORM 6-K

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

29 October, 2003

TELIASONERA AB

Markackagatan 11 S-123 86 Farsta, Sweden
(Address of principal executive offices)

0-30340

(Commision File Number)

     Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F x Form 40-F o

     Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o No x

 

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SIGNATURES

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

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TeliaSonera January-September 2003 — Pro Forma ¹)

Record free cash flow through strong earnings and lower CAPEX

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Net sales for the nine-month period increased 1 percent to SEK 60,718 million (60,034).

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Net income for the nine-month period improved to SEK 4,836 million (-35,898) and earnings per share to SEK 1.03 (-7.68).

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Profit improvements across the Group during the nine-month period generated improved operating income of SEK 9,531 million (-46,004). Excluding non-recurring items2), operating income improved to SEK 11,274 million (3,842).

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Free cash flow for the nine-month period increased to SEK 14,190 million (5,862).

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Third quarter EBITDA margin excluding non-recurring items increased to 39 percent (34).

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Synergies ahead of schedule. Decisions taken in 2003 are expected to yield annual cost savings of SEK 1,302 million and annual investment savings of SEK 321 million at the end of 2005.

Key Figures

1) Pro forma presentation as if the merger of Telia and Sonera had taken place on January 1, 2002 and excluding Telia’s Finnish mobile operations and Swedish cable TV operations.

2) Non-recurring items, see table on page 27.

3) Convenience translation only, conversion rate SEK 1 = EUR 0.111433.

4) Including Sonera operations and the new Baltic subsidiaries since December 3, 2002 and Telia’s Finnish mobile operations and Swedish cable TV operations through May 31, 2003.

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Comments from Anders Igel, President and CEO

“Compared with last year, we have posted a very strong earnings improvement. At the same time, we have merged Telia and Sonera. Based on our strong position, we have now together with a large number of managers and employees developed and agreed upon a new and common direction for TeliaSonera. This direction, which is built on the view that increased simplicity and service for customers are the drivers behind long-term growth, shows the way for transforming TeliaSonera into a genuine service company.”

Outlook

Net sales for the second half of 2003 are expected to be in line with the second half of 2002.

CAPEX is expected to be lower than 12 percent of sales for the full year.

Operating income excluding non-recurring items for the second half-year of 2003 is expected to be in line with the level of the first half-year.

Third Quarter Review of the Group

Strong earnings growth

Net sales were on a par with sales in the same quarter the preceding year, SEK 20,094 million (20,102). Disregarding exchange rate fluctuations, net sales increased 2 percent.

Sales for mobile communications surged in Denmark, Norway, the Baltic countries and Eurasia. Mobile growth was more moderate in Sweden, while mobile sales dropped somewhat in Finland.

Sales for Internet and broadband increased across all markets while fixed voice sales generally dropped. Group net sales were negatively affected by the phase-out of operations within International Carrier.

In addition, the mobile operators in Turkey and Russia that are not consolidated showed continued strong growth in the third quarter.

Earnings showed substantial improvements across the operations. Operating income increased to SEK 3,560 million (-12,655). Earnings were affected by non-recurring items. Excluding non-recurring items, operating income increased to SEK 4,084 million (1,032).

EBITDA (operating income before depreciation, amortization and write-downs and before income from associated companies) improved to SEK 7,572 million (2,913). Exchange rate fluctuations had a negative impact of 2 percent.

EBITDA excluding non-recurring items increased to SEK 7,915 million (6,889) and the margin strengthened to 39.4 percent (34.3).

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Financial items totaled SEK -300 million (-471), of which capital losses and write-downs in Holding comprised SEK -31 million (-65).

Net income increased to SEK 1,735 million (-12,266) and earnings per share increased to SEK 0.37 (-2.62).

CAPEX declined to SEK 1,889 million (2,788).

Strong free cash flow

Improved EBITDA and low CAPEX generated strong free cash flow of SEK 5,138 million (572). Disbursements from restructuring reserves affected free cash flow by SEK —416 million. Reserves for future disbursements as per September 30, 2003 totaled SEK 4,244 million.

The strong cash flow in the third quarter enabled the Group to reduce net debt by SEK 6,621 million to SEK 21,964 million. The equity/assets ratio increased from 54.7 to 56.7 percent.

Strong customer growth with good margins

Over the last 12 months, TeliaSonera had strong customer growth combined with good margin development.

At the end of the third quarter, TeliaSonera had 11.6 million mobile customers in the consolidated companies and 23 million in associated companies, which represents an annual growth of 13 and 39 percent, respectively.

The increase in the number of Internet customers mostly compensated for the customer decline within fixed voice.

Further synergy initiatives

During the third quarter, further initiatives to win merger synergies were taken within IT systems and infrastructure, purchasing and other areas.

Synergy savings from decisions to date

Within network operations, additional synergy gains were realized, attributable to the integration of the carrier operations previously run separately by Telia and Sonera. Overlapping operations are being phased out and the traffic moved over to the wholly owned network.

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Parts of Sonera’s operations in the United Kingdom, the United States, Sweden and Germany are closed down.

The redundancy stated in Sweden and Finland includes 110 employees within product and service development where duplicate functions were eliminated.

The initiatives taken in 2003 are expected to yield annual cost savings of SEK 1,302 million and annual investment savings of SEK 321 million at the end of 2005. For the nine-month period, cost savings totaled SEK 427 million and investment savings SEK 340 million.

Total one-off expenses for the implementation of initiatives to date are estimated at approximately SEK 727 million, of which SEK 451 million was posted during the nine-month period.

Simplicity and service to drive long-term growth

TeliaSonera has involved large parts of the company in the development of the TeliaSonera Vision 2010, a set of shared values and a revision of the Business Concept. Simplicity and service will be the two leading concepts for TeliaSonera in the future and are regarded as the drivers behind long-term growth. Simplicity in all its aspects is seen as the single most important element in order for customers to start using new services more frequently. TeliaSonera aims at having the best-served customers and easy-to-use services by increasing simplicity in all aspects of operations.

TeliaSonera will be transformed into a genuine service company. Benchmarking for service will not only be traditional competing operators, but important players in the European service industry.

The Vision 2010 signifies a now integrated TeliaSonera. Efficiency measures and synergy realization will continue, and the joint operation now has a common direction in which to move.

Review of Profit Centers

Strong margin in Sweden despite reduced sales in fixed communications

In Sweden, net sales fell 3 percent to SEK 10,410 million compared with the same quarter last year due to decreased traffic volume within fixed voice. TeliaSonera defended its leading market position within mobile communications. Competition in fixed communications and broadband continued to be strong.

Streamlining and synergies from the merger contributed to improved earnings despite reduced sales. Operating income excluding non-recurring items increased 9 percent to SEK 2,987 million. EBITDA excluding non-recurring items increased to SEK 4,504 million (4,473) and the margin rose to 43.3 percent.

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SEK 79 million (494) was invested in mobile communications and SEK 509 million (426) in fixed communications, including broadband and mobile-supporting CAPEX.

The redundancy program was concluded according to plan during the quarter. The full effect will be seen in the first quarter of 2004.

Customer segments

The marketing activities within the consumer segment were intensified during the quarter. Special offers were launched for those who choose more than one telecommunications service from TeliaSonera. Telia Kom Igång was launched to simplify services for broadband customers by offering assistance for broadband installation.

A new distribution channel for mobile communications was introduced. Mobile communications services are now sold along with fashion apparel in Stockholm.

Marketing efforts so far have been received positively although it is too early to have a firm opinion on the effects over time.

Within the business segment increased marketing efforts with targeted personal sales launched early 2003 yielded results. TeliaSonera’s position in fixed communications was thereby maintained within the segment and the position in mobile was strengthened.

Several contracts were signed within the large corporate segment, including an agreement with the Swedish agricultural cooperatives for the delivery and support of WAN communications connecting 350 locations.

Broadband network construction agreements were signed with four additional municipalities.

Mobile communications

External net sales rose 3 percent to SEK 2,913 million, mainly due to customer growth. EBITDA excluding non-recurring items improved to SEK 1,497 million (1,444), but the margin dropped to 45.5 percent (46.7).

The number of mobile customers rose by 75,000 to 3,762,000. Annual customer growth was 222,000.

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Churn (calculated on an annual basis) increased from 10 to 12 percent compared with the second quarter.

The number of customers with GPRS service increased by 55,000 to 150,000.

Customers via service providers increased by 6,000 to 117,000.

The number of SMS messages sent per customer and month climbed to 20 (13).

Average traffic volume per customer and month (MoU) decreased to 134 minutes (135) and ARPU dropped to SEK 290 (293) due to a larger share of prepaid card customers.

During the quarter, additional testing was performed on the technical functionality of the Swedish UMTS network, which is jointly owned by TeliaSonera and Tele2. Svenska UMTS-nät AB has invested SEK 943 million in the network to date. The total loan facility was reduced from SEK 11,000 million to SEK 7,000 million in September.

On October 1, the interconnect fee was further reduced from SEK 0.88 SEK to SEK 0.82 per minute.

Fixed communications

External net sales fell 3 percent to SEK 7,295 million. Voice sales decreased 6 percent to SEK 4,920 million while sales of Internet and data services climbed 4 percent to SEK 1,978 million.

The margin increased to 42.2 percent (39.6). Reduced sales resulted in EBITDA excluding non-recurring items at approximately the same level as the comparative quarter, SEK 3,007 million (3,029).

The number of customers with broadband access increased by 15,000 to 380,000 and the number of customers with dial-up Internet access increased by 15,000 to 805,000. Annual customer growth was 98,000 and 69,000, respectively.

The number of fixed voice subscriptions fell by 26,000 to 5,483,000. Annual customer decrease was 111,000.

On October 24, TeliaSonera reduced its price to end customers for evening and weekend calls from TeliaSonera’s fixed network to mobile phones connected to Tele2’s and Vodafone’s mobile network.

Fierce competition in Finland following mobile number portability

Third-quarter net sales and earnings were affected by the strong growth in mobile usage. Sales and earnings were negatively affected by mobile price reductions of close to SEK 200 million and accounting adjustments of SEK 143 million. The adjustments are mainly attributable to incorrect accrued revenues from prepaid cards in past years.

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Excluding the adjustments, net sales increased approximately 1 percent and earnings improved compared with the third quarter of 2002.

CAPEX decreased to SEK 458 million (505). SEK 231 million (214) was invested in mobile communications and SEK 227 million (291) in fixed communications.

Customer segments

The implementation of mobile number portability on July 25 led to intense activity on the Finnish mobile market, leading mobile operators to launch a wide range of special offers, including fee-free airtime and tie-in offers.

Of Finland’s total 4.5 million mobile customers, approximately 155,000 took advantage of the opportunity to switch operators while retaining their mobile phone numbers. During the third quarter, the number of TeliaSonera mobile customers decreased by 30,000. The number of subscriptions declined in the consumer segment, but subscription growth was positive in the business segments.

To meet increased competition in the consumer segment, a single-rate domestic and SMS subscription, Sonera One, was launched in the beginning of October.

In order to accelerate offering high-speed mobile data services, a decision was made to introduce EDGE in the GSM system starting in the Helsinki metropolitan area. Efforts to build and test UMTS will continue.

TeliaSonera’s position in fixed communications in southwestern Finland, the country’s third largest telecom market, was strengthened through the increase of the shareholding in Auria Group from 29 to 40 percent. On October 1, the shareholding was increased to 55 percent. The plan is to acquire the remaining shares by tender offer in cash.

Within the business segment, targeted sales campaigns have been carried out with positive response. The integration of Auria’s sales force into TeliaSonera’s sales model has started in order to improve customer service.

A new voice over IP service aimed at large companies was launched. At the same time, the Puhekaista consumer VoIP service was re-launched. This service enables TeliaSonera’s broadband customers to use Internet for voice services.

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A customized concept, Sonera Broadband, for rural areas and for municipalities was developed, and new contracts were signed with ten municipalities.

During the third quarter, agreements were signed for delivering various communications solutions to several major companies, including Stora Enso, Lindström Oy and Rautaruukki Oyj.

Within mobile communications, agreements were signed with two additional service providers.

Mobile communications

Mobile communications external net sales decreased 7 percent to SEK 2,615 million and EBITDA decreased to SEK 1,299 million (1,496). The margin fell to 49 percent (53). Excluding the accruals adjustment, sales decreased 2 percent due to price erosion and customer loss, EBITDA declined to SEK 1,442 million and the margin to 52 percent.

Churn was high, 21.8 percent compared with the second quarter, 10.2. The number of mobile customers fell by 30,000 to 2,441,000. Annual customer decrease was 60,000.

The number of customers via service providers climbed by 37,000 to 95,000 and TeliaSonera’s service providers strengthened their market positions during the quarter.

The number of customers with GPRS service climbed by 93,000 to 305,000.

The number of SMS messages sent per customer and month remained constant (27).

Outgoing traffic per customer and month rose to 163 minutes (153), but ARPU declined to EUR 37.7 (40.3). Excluding the adjustment of accruals, ARPU remained at approximately the same level as the comparative quarter.

Fixed communications

External net sales for fixed communications totaled SEK 1,588 million (1,559). Fixed voice sales decreased 2 percent to SEK 646 million, while sales for Internet and data services climbed 3 percent to SEK 619 million due to strong demand for broadband access.

EBITDA increased to SEK 374 million (302) and the margin to 22 percent (19) due to increased sales and cost efficiency efforts.

The number of fixed voice subscriptions fell by 9,000 to 477,000. Annual subscription decrease was 33,000.

The number of broadband customers increased by 16,000 to 119,000, of which 105,000 are consumers. Annual customer growth was 51,000.

The number of customers with dial-up Internet declined by 7,000 to 155,000 in the third quarter.

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Continued positive trend in Norway

TeliaSonera further strengthened its position in the Norwegian market during the third quarter. Continued strong customer growth increased net sales by 4 percent despite price cuts on interconnect traffic and SMS. In local currency, the increase was 14 percent.

EBITDA was in line with the comparable quarter and the margin fell somewhat due to price reductions. In local currency, EBITDA increased 12 percent.

Operating income improved, primarily due to lower depreciation subsequent to exchange rate effects.

The average traffic volume per customer and month was 170 minutes (164). ARPU fell to NOK 368 (377) due to price cuts.

The number of customers rose by 9,000 to 1,190,000. Annual customer growth was 168,000.

The number of customers via service providers increased by 4,000 to 89,000.

The number of SMS messages sent per customer and month rose to 76 (65).

The interconnect fee for termination in NetCom’s network was reduced on July 1 from NOK 1.11 to NOK 1.01. The price will be reduced again in January 2004 to NOK 0.91.

The extensive use of SMS serves as a good platform for launching MMS services. MMS was launched at the end of 2002. At the end of August 2003, NetCom surpassed 100,000 registered MMS users. 1,550,000 MMS were sent in September. The service remains free of charge, but starting on December 1, a fee of NOK 2.50 will be implemented for each MMS sent.

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Strong earnings improvement in Denmark

In Denmark, earnings showed substantial improvement, attributable to a strong trend in all operations. In the third quarter, Danish operations reported a positive EBITDA of SEK 19 (-540) million.

Of CAPEX, SEK 50 (185) million referred to mobile communications and SEK 41 (42) million to fixed communications.

Mobile communications

Robust customer growth increased external net sales by 37 percent to SEK 343 million despite increased price pressure and EBITDA improved to SEK -37 million (-119).

The number of customers rose by 20,000 to 504,000. Annual customer growth was 55,000.

The average traffic volume per customer and month increased to 131 minutes (107) and ARPU climbed to DKK 238 (189).

The number of SMS messages sent per customer and month increased to 231 (45). The new subscription TeliaXpress includes free SMS, which contributed to the robust increase in SMS usage during the quarter.

Fixed communications

External net sales for fixed communications (excluding Stofa) increased to SEK 306 million (257). The restructuring of the fixed operations had a positive effect on earnings and EBITDA excluding non-recurring items improved to SEK 2 million (-446).

During the third quarter, SEK 42 million of the restructuring reserve was disbursed. The reserve totaled SEK 342 million on September 30, 2003. Up to 10 percent of the reserve is expected to be utilized during the fourth quarter and the remaining part (leasing contracts) during the next three-year period.

In Stofa, external net sales rose 10 percent to SEK 160 million due to customer growth and increased usage. EBITDA improved to SEK 54 million (25). The number of television customers increased by 1,000 to 192,000 and the number of customers with broadband access climbed by 5,000 to 96,000 during the quarter.

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Baltic Countries

Strong mobile growth in Lithuania

The mobile operator Omnitel increased its net sales 13 percent to SEK 543 million. Increased sales improved EBITDA excluding non-recurring items to SEK 234 million (201) and strengthened the margin to 43 percent (42). Operating income increased to SEK 96 million (72).

The number of customers increased by 60,000 to 965,000. Annual customer growth was 206,000.

The number of SMS messages sent per customer and month declined to 29 (30).

On August 26, TeliaSonera signed an agreement to acquire Motorola’s 35-percent shareholding in Omnitel at a price of USD 117 million. The acquisition requires the approval of the Lithuanian Competition Council. If completed, the transaction will increase TeliaSonera’s shareholding in Omnitel from 55 to 90 percent.

The fixed network operator Lietuvos Telekomas reported an 18 percent drop in net sales to SEK 523 million. Fixed voice sales decreased by 25 percent to SEK 393 million due to price cuts and tough competition from the mobile sector. However, Internet and data services sales climbed 12 percent to SEK 88 million due to increased demand for broadband.

Lower sales reduced EBITDA to SEK 266 million (350) and the margin fell to 51 percent (55).

Operating income includes non-recurring items of SEK 160 million for impairment charges (real estate, network capacity and equipment) and redundancies. Excluding non-recurring items, operating income fell to SEK 23 million (47).

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The number of fixed voice subscriptions fell by 23,000 to 836,000. Annual customer decrease was 159,000.

The number of customers with ADSL rose by 3,000 to 18,000. Annual customer growth was 10,000.

Strong mobile growth and good earnings in fixed operations in Latvia

The mobile operator Latvijas Mobilais Telefons (LMT) increased its net sales by 4 percent to SEK 487 million, due to customer growth. In local currency, the increase was 14 percent.

EBITDA climbed to SEK 257 million (246) and the margin improved to 53 percent (52). In local currency, EBITDA increased 15 percent.

Operating income improved to SEK 166 million (137).

The number of customers climbed by 16,000 to 507,000. Annual customer growth was 81,000.

To meet increased competition following the deregulation of the Latvian market the fixed network operator Lattelekom (associated company) has successfully carried out extensive cost cutting programs. Lattelekom showed slightly decreased sales but increased earnings.

Share of net income increased to SEK 44 million (-17). After amortization of goodwill and fair value adjustments, income from Lattelekom increased to SEK 67 million (16).

Good performance in Estonia

The mobile operator EMT (associated company) reported increased net sales and earnings. Share of net income increased to SEK 77 million (72). After amortization of goodwill and fair value adjustments, income from EMT increased to SEK 55 million (50).

During the quarter, EMT and two other operators were granted licenses for UMTS in Estonia.

The fixed network operator Elion Enterprises (associated company) reported increased net sales and earnings. Share of net income increased to SEK 43 million (20). After amortization of goodwill and fair value adjustments, income from Elion increased to SEK 32 million (8).

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2 million subscriber mark surpassed in Eurasia

Fintur (consolidated as of September 2002) reported strong net sales and earnings growth. In local currency, sales rose 42 percent and EBITDA improved 79 percent compared with the same quarter last year. The number of mobile customers rose by 239,000 to 2,123,000. Annual customer growth was 621,000.

In Kazakhstan, KCell increased its customer base during the quarter by 114,000 to 837,000.

In Azerbaijan, Azercell increased its customer base by 81,000 to 845,000.

In Georgia, Geocell increased its customer base by 25,000 to 275,000.

In Moldova, Moldcell increased its customer base by 19,000 to 166,000.

Over 1 million new mobile customers in Russia

MegaFon (associated company) reported strong growth in both net sales and earnings during the quarter. The number of customers surged by more than one million to 5,327,000. Customer growth was strongest in Moscow and in the regions North-West, Caucasus and Volga, which accounted for about 85 percent of the customer growth in the third quarter.

Annual customer growth was 3,028,000.

The share of net income from MegaFon increased to SEK 227 million (-2). After amortization of goodwill and fair value adjustments, income was SEK 177 million (-57).

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Over 900,000 new customers in Turkey

Turkcell (associated company) reported a positive trend in both net sales and earnings during the quarter. Net sales rose 17 percent to USD 583.7 million and EBITDA improved to USD 217.9 million (185.6). The margin was unchanged (37.3 percent).

The number of customers climbed by more than 900,000 to 17,200,000. Annual customer growth was 3,400,000.

Net income improved to USD 73.2 million (5.6), including an income tax benefit of USD 40.7 million.

CAPEX totaled USD 39.1 million (20.7).

Share of net income from Turkcell increased to SEK 218 million (15). After inflation adjustments, amortization of goodwill and fair value adjustments, income was SEK 114 million (-1,020).

The high inflation rate in Turkey during the nine-month period increased TeliaSonera’s carrying value of Turkcell by SEK 2,061 million. In the long term, we believe that inflation should be reflected in the value of the Turkish lira and therefore the increase of the carrying value may be temporary.

A statutory auditor appointed by one shareholder has called for an extraordinary general meeting. The extraordinary general meeting is scheduled for October 30, 2003, and covers the election of the Board Members of Turkcell. TeliaSonera has challenged the call for the extraordinary general meeting.

Turkcell’s financials are included in TeliaSonera’s reporting with a one-quarter lag.

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Continued earnings improvement in International Carrier

Net sales fell 40 percent due to weak growth in the carrier market and the phase-out of unprofitable business. Compared with the second quarter, the decrease was 15 percent.

The restructuring of Telia’s previous operations has substantially improved earnings. SEK 301 million of the restructuring reserve was disbursed during the third quarter. At the end of the period, the reserve totaled SEK 3,109 million. Up to SEK 350 million is expected to be disbursed during the fourth quarter, and SEK 1,500 million in 2004. The remaining part will be used later during the phase-out of long-term contracts.

The carrier operations previously run separately by Telia and Sonera are being integrated in order to win synergies. This has led to provisions and other one-off items of SEK 392 million, and accelerated depreciation of SEK 179 million until the end of 2004. Payback time for the integration is estimated to be less than two years and the integration is expected to reach full run-rate yearly savings of SEK 272 million by 2005.

Upgrades to the wholly owned network entailed increased CAPEX compared with the second quarter. Fourth-quarter CAPEX is expected to be lower.

TeliaSonera Holding

Net sales increased 9 percent. For comparable units, the increase was 34 percent, primarily due to a strong development within Sonera Zed, where sales doubled to SEK 187 million compared with the same quarter last year.

Telia Credit and Telia Promotor were moved from Holding to TeliaSonera Sweden during the third quarter. At the same time, leasing operations concerning TeliaSonera’s own products were transferred from Telia Finans to Telia Credit. Telia Finans will only finance products from outside the Group. Operational performance of Telia Finans improved considerably.

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The 24 percent holding in the listed U.S. company Metro One Telecommunications was written down by SEK 41 million to SEK 161 million due to Metro One’s falling share price.

Order intake in INGROUP, where TeliaSonera owns 37 percent, was disappointing. A number of options are being discussed with the other owners.

Operating income before non-recurring items declined, mainly due to decreased earnings in Telefos and Metro One.

In order to clarify the impact on given guarantees, an update on TeliaSonera’s view of the 3G business plans of Italian IPSE and Spanish Xfera is currently underway.

Stockholm, October 29, 2003

Anders Igel
President and CEO

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Auditors’ Review Report

We have made a review of this interim report in accordance with recommendations issued by the Swedish Institute of Authorized Public Accountants. A review is substantially limited in scope in comparison to an audit. Nothing has come to our attention that indicates that this interim report fails to comply with the requirements of the Swedish Securities Exchange Act and International Financial Reporting Standards (IFRS/IAS).

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Condensed Consolidated Income Statements

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Condensed Consolidated Balance Sheets

Condensed Consolidated Cash Flow Statements

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Segment Information

1) For information about external net sales per product area: www.teliasonera.com/ir

2) Including eliminations between fixed and mobile communications

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Quarterly Data

Non-Recurring Items

Non-recurring items in the third quarter of 2003 were primarily “Within EBITDA” related to synergies implementation in International Carrier (SEK —363 million), redundancies in Lietuvos Telekomas (SEK —50 million), and the exchange rate effect on previous provisions in International Carrier (SEK 59 million); “Within Depreciation, amortization and

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write-downs” for write-downs related to synergies implementation within International Carrier (SEK —29 million), impairment charges in Lietuvos Telekomas (SEK —110 million); and “Within Income from associated companies” for a write-down of the Metro One holding (SEK —41 million); and “Within Net financial revenues and expenses” for capital losses and write-downs in Holding (SEK —31 million).

In addition to non-recurring items noted in the third quarter, non-recurring items for the nine-month period include mainly provisions for redundancies in Sweden and Finland, write-downs of Infonet and venture capital holdings, a previous write-down of Metro One and capital gains from the sales of Bharti Mobile and Netia.

Number of Customers ¹⁾

1) For further operational data: www.teliasonera.com/ir

2) Turkcell figures are reported with a one-quarter lag

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TeliaSonera January-September 2003 — Legal ¹⁾

Condensed Consolidated Income Statements

1) Including Sonera operations and the new Baltic subsidiaries since December 3, 2002 and including Telia’s Finnish mobile operations and Swedish cable TV operations through May 31, 2003.

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Condensed Consolidated Balance Sheets

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Condensed Consolidated Cash Flow Statements

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Condensed Consolidated Statements of Changes in Shareholders’ Equity

Long-Lived Assets

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Investments

Net Interest-Bearing Liability

Changes in Share Capital

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Financial Instruments

Deferred Tax

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Contingent Assets and Contingent Liabilities

TeliaSonera has a dispute with Tele2 and Vodafone concerning interconnect prices in Sweden. TeliaSonera believes that it has recorded sufficient provisions.

Contractual Obligations

Exchange Rates

Basis for Presentation

General. As in the annual accounts for 2002, TeliaSonera’s consolidated financial statements for the three-month and nine-month periods ended September 30, 2003, have been prepared in accordance with International Financial Reporting Standards (IFRS/IAS). The parent

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company TeliaSonera AB’s financial statements have been prepared in accordance with the Annual Accounts Act and other Swedish regulations. This report has been prepared in accordance with IAS 34 “Interim Financial Reporting.”

Amounts and dates. Unless otherwise specified, all amounts are in millions of Swedish kronor (SEK million) or other currency specified and are based on the three-month and nine-month periods ended September 30, 2003 for income statement items and as of September 30, 2003 for balance sheet items, respectively.

New accounting standards. IAS 41 “Agriculture” became effective on January 1, 2003. IAS 41 does not affect TeliaSonera’s operations.

Restated segment reporting. TeliaSonera’s business organization was changed on January 1, 2003. Hence, segment information in this report has been restated.

Changed definitions and concepts. Effective January 1, 2003, the definition of EBITDA was changed. The previous definition Operating income before depreciation, amortization and write-downs was changed to Operating income before depreciation, amortization and write-downs and before Income from associated companies.

Underlying EBITDA was renamed EBITDA excluding non-recurring items, but indicates the same measure as previously. This means that the previous concept Items not reflecting underlying business operations has been changed to Non-recurring items.

A new profit measure, Operating income excluding non-recurring items, was introduced, consisting of Operating income less non-recurring items within EBITDA and also less write-downs within Depreciation, amortization and write-downs and less capital gains/losses and write-downs within Income from associated companies.

Furthermore, effective January 1, 2003, only capital gains/losses, write-downs, restructuring programs or similar items that represent more than SEK 100 million on an individual basis, will be reported as non-recurring. Earlier periods have not been restated.

Changes in Group Composition

Sonera Oyj. As a result of a mandatory redemption offer, which expired on January 31, 2003, TeliaSonera acquired Sonera shares, including shares in the form of ADSs, representing 4.4 percent of the shares and votes. Following the completion of the mandatory redemption offer, TeliaSonera in total held 99.4 percent of Sonera shares and votes.

In addition, in December 2002, TeliaSonera commenced a separate compulsory acquisition proceeding under Finnish law pursuant to which the remaining holders of Sonera shares were required to surrender their Sonera shares to TeliaSonera for redemption at a fair price as determined under Finnish law. As required under Finnish law, an arbitral panel was appointed to hear and resolve any disputes concerning TeliaSonera’s right of redemption and the redemption price in the

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compulsory acquisition proceeding. On March 20, 2003, at the request of the arbitral panel, TeliaSonera issued a counter-indemnity for a bank guarantee for the payment of the redemption price plus accrued interest with respect to all outstanding Sonera shares not held by TeliaSonera. According to Finnish law, as a result of the arbitral panel’s acceptance of the bank guarantee, TeliaSonera became the sole record and beneficial owner of Sonera’s shares. Simultaneously, the Sonera share was delisted from the main list of Helsinki Exchanges. On June 26, 2003, the arbitral panel determined the redemption price for the remaining Sonera shares. The redemption price for the remaining Sonera shares plus accrued interest was paid on July 11, 2003.

Com Hem/Telia Finland. On June 5, 2003, TeliaSonera sold its Swedish cable TV operator Com Hem AB to EQT Northern Europe and on June 6, 2003, Telia’s Finnish mobile operations were sold to Finnet Oy. Telia agreed to dispose of these operations as part of its undertakings to the European Commission in the context of the merger between Telia and Sonera.

Bharti. In May 2002, an agreement was signed with the Indian company Bharti Tele-Ventures for the sale of TeliaSonera’s holding of 26 percent of the shares in the mobile operator Bharti Mobile Ltd. The transaction was completed on June 16, 2003.

Netia. As of December 31, 2002, TeliaSonera owned 48 percent of the share capital in the Polish company Netia S.A. (formerly Netia Holdings S.A.) As part of a financial restructuring, a conversion of lenders’ claims to equity in the company was completed on January 30, 2003, reducing TeliaSonera’s shareholding to 4.4 percent. On May 16, 2003, the final step of Netia’s restructuring, which required the issuance of warrants to pre-restructuring shareholders of Netia, including TeliaSonera, was completed. TeliaSonera received subscription warrants entitling it to acquire an aggregate of 31,300,532 Netia shares.

On May 22, 2003, TeliaSonera’s 11 percent stake in the Polish long-distance operator Netia 1 Sp z o.o. was sold to the other shareholder Netia.

Starting in June 2003, TeliaSonera has sold most of its shares and subscription warrants in Netia, reducing its shareholding in Netia to 1.1 percent. Assuming that all subscription warrants issued by Netia will be exercised and exchanged for shares, TeliaSonera would hold 4.0 percent of Netia’s share capital. TeliaSonera has entered into agreements to completely divest its holdings in Netia.

Reveko. On July 1, 2003, TeliaSonera’s 55 percent stake in the Estonian company Reveko Telekom AS was sold to the Elion Group.

Omnitel. On August 26, 2003, an agreement was reached with Motorola to acquire Motorola’s 35 percent shareholding in the Lithuanian mobile operator UAB Omnitel. The final closing of the deal is contingent on the approval of the transaction by the Lithuanian Competition Council. When the transaction is concluded, TeliaSonera will hold 90 percent of the shares in Omnitel.

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Auria Group. On September 17, 2003, TeliaSonera announced its intention in three consecutive steps to acquire full ownership in the Finnish fixed-line operator Auria Group. The parent company of the group is Loimaan Seudun Puhelin Oy (LSP). The first step was executed in September, increasing TeliaSonera’s shareholding in LSP from 29 percent to 40 percent. On October 1, TeliaSonera increased its holding in LSP to 55 percent and launched a tender offer in cash to the owners of the remaining LSP shares. As of October 24, TeliaSonera held 74 percent of the shares in LSP.

Related Party Transactions

The Swedish and the Finnish States. The TeliaSonera Group’s services and products are offered to the Swedish and the Finnish states, their agencies, and state-owned companies in competition with other operators and on conventional commercial terms. Certain state-owned companies run businesses that compete with TeliaSonera. Likewise, TeliaSonera buys services from state-owned companies at market prices and on otherwise conventional commercial terms. Neither the Swedish and Finnish states and their agencies, nor state-owned companies represent a significant share of TeliaSonera’s net sales or earnings.

Svenska UMTS-nät. TeliaSonera owns 50 percent of Svenska UMTS-nät AB. In the nine-month period ended September 30, 2003, TeliaSonera sold services and products worth SEK 73 million to Svenska UMTS-nät.

Lattelekom. TeliaSonera holds a participating interest in the Latvian company Lattelekom SIA. In the three-month period ended September 30, 2003, TeliaSonera sold services and products to Lattelekom worth SEK 25 million and purchased services and products worth SEK 13 million. In the nine-month period ended September 30, 2003, TeliaSonera sold services and products worth SEK 89 million and purchased services and products worth SEK 58 million.

MegaFon. TeliaSonera holds a participating interest in the Russian company OAO MegaFon. As of September 30, 2003, TeliaSonera had interest-bearing and non-interest-bearing claims on MegaFon of SEK 352 million.

Infonet. TeliaSonera owns a participating interest in the American company Infonet Services Corp. In the three-month period ended September 30, 2003, TeliaSonera sold services and products to Infonet worth SEK 12 million and purchased services and products worth SEK 55 million. In the nine-month period ended September 30, 2003, TeliaSonera sold services and products worth SEK 36 million and purchased services and products worth SEK 162 million.

Telefos. TeliaSonera owns 49 percent of the shares in Telefos AB. As of September 30, 2003, TeliaSonera had interest-bearing claims on the Telefos Group of SEK 1,077 million and had signed a limited supplementary guarantee of SEK 150 million for the credit-insured pension commitments of Telefos companies. In the three-month period ended September 30, 2003, TeliaSonera sold services and products worth

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SEK 41 million to the Telefos Group and bought services and products worth SEK 546 million. In the nine-month period ended September 30, 2003, TeliaSonera sold services and products worth SEK 105 million and bought services and products worth SEK 1,916 million. Some of the services purchased by TeliaSonera referred to construction of fixed assets.

IN. TeliaSonera holds an indirect participating interest in INGROUP Sweden AB (IN). In the three-month period ended September 30, 2003, TeliaSonera sold services and products worth SEK 8 million to IN and bought services and products worth SEK 64 million. In the nine-month period ended September 30, 2003, TeliaSonera sold services and products worth SEK 11 million and bought services and products worth SEK 202 million.

Other relations. In addition to those specified, TeliaSonera buys and sells services and products to a limited extent from these and other associated companies, in all cases on market terms.

Credit Rating and Financing

In the first quarter of 2003, the rating agencies Moody’s and Standard & Poor’s assigned new credit ratings for TeliaSonera AB. The rating for long-term borrowings is A2 with a negative outlook from Moody’s, and from Standard & Poor’s the long-term rating of A was confirmed in May after having been on Credit Watch Negative during the spring. Standard & Poor’s rating has a stable outlook. These ratings represent a solid investment grade level and are thus expected to allow TeliaSonera continued good access to the financial markets.

In March 2003, TeliaSonera AB signed a new committed credit facility agreement (Revolving Credit Facility) with a syndicate of prominent banks. The five-year facility amounts to EUR 1,400 million with final maturity in March 2008. The main purpose of the facility is to serve as liquidity back-up for TeliaSonera.

In the second quarter of 2003, TeliaSonera AB updated its open-market financing programs, which include the Euro Medium Term Note (EMTN) program with a new program size of EUR 5,000 million; the Swedish domestic Flexible Term Note (FTN) program with a program size of SEK 12,000 million; the Euro Commercial Paper (ECP) program with a program size of EUR 1,000 million, and also established a new domestic Finnish Commercial Paper program with a program size of EUR 300 million.

The intention is that TeliaSonera AB will continue to make future refinancing of the outstanding Sonera debt, as well as new financing required for the Sonera operations.

The positive cash flow in the third quarter allowed for continued amortization of the Group’s maturing loans during the period. There are no significant scheduled loan redemptions during the remainder of 2003.

During the third quarter, TeliaSonera AB’s guarantee commitment for Svenska UMTS-nät AB was reduced to a maximum of SEK 3,500

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million, as a consequence of the company’s bank-loan facility being reduced to SEK 7,000 million (SEK 11,000 million).

Non-Cash Transactions

Sonera. The completion of the merger with Sonera was partly effected through an exchange of shares (see “Changes in Group Composition” above).

Vehicles. TeliaSonera leases vehicles through financial leasing, primarily from GE Capital. New acquisitions in the three-month period and the nine-month period ended September 30, 2003 entailed a non-cash investment of SEK 13 million and SEK 41 million, respectively.

Infrastructure/capacity swaps. Within the international carrier operations, swap contracts for infrastructure and capacity are signed with other carriers. Until both parties have fulfilled all deliveries as agreed, the value provided may differ from the value received. As of September 30, 2003, TeliaSonera had, through non-cash swapping, net received infrastructure and network capacity with a book value of SEK 7 million.

AUCS. Claims of SEK 157 million on the Dutch associated company AUCS Communications Services v.o.f. were converted to equity in the company during the second quarter.

Stock Option Schemes

At General Meetings of shareholders of TeliaSonera AB, a number of stock option schemes have been adopted. Summarized information about warrants outstanding as of September 30, 2003 by exercise price is as follows.

On September 30, 2003, the closing price for the TeliaSonera share on Stockholmsbörsen was SEK 33.60. Detailed information regarding the stock option schemes is presented in TeliaSonera’s Annual Report for 2002. In May 2003, the 2002/2005:B series of warrants was cancelled, due to non-fulfillment of certain exercise criteria. According to the terms, the exercise price of the 2002/2005:A series of warrants was adjusted by the 2002 dividend per share. If fully exercised, the outstanding stock options will entail an increase in share capital of approximately SEK 148 million, equal to a 1.0 percent increase in the number of shares.

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Swedish GAAP

Differences in principles. TeliaSonera’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS/IAS). Effective January 1, 2003, IFRS/IAS deviates from Swedish GAAP, relevant to TeliaSonera, only with respect to the reporting of financial instruments.

Translation into Swedish GAAP. Application of Swedish GAAP affects consolidated net income and shareholders’ equity as follows.

Finnish GAAP

The following information is provided pursuant to the Finnish Financial Supervision Authority decision no. 28/269/2002.

This interim report has been prepared in accordance with chapter 2, section 5 of the Finnish Securities Markets Act. TeliaSonera prepares its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS/IAS). The main differences between Finnish Accounting Standards (Finnish GAAP) and IFRS/IAS, relevant to TeliaSonera, are described in TeliaSonera’s Annual Report for 2002. There were no material changes in the first nine months of 2003.

Parent Company

The parent company TeliaSonera AB, which is domiciled in Stockholm, comprises the Group’s Swedish activities in development and operation of fixed networks and basic production of network services. The parent company also includes Group executive management functions and the Group’s internal banking operations.

Net sales for the first nine months were SEK 15,935 million (17,300), of which SEK 12,483 million (14,244) was invoiced to subsidiaries. Earnings before appropriations and taxes improved to SEK 6,229 million (-250), due to improved operating income and Group contributions from subsidiaries. Earnings after appropriations and taxes were SEK 3,947 million (611). Also due to completion of the merger with Sonera,

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shareholders’ equity increased to SEK 93,326 million (89,197 at year-end). Retained earnings amounted to SEK 23,828 million (21,751).

The balance sheet total decreased to SEK 131,455 million (139,002 at year-end). Cash flow from operating activities improved to SEK 6,088 million (7,489) and cash flow before financing activities to SEK 10,835 million (840). Net claims were SEK 8,678 million (net borrowings of SEK 451 million at year-end). Cash and cash equivalents totaled SEK 5,744 million (3,294).

The equity/assets ratio (including the equity component of untaxed reserves) improved to 77.8 percent (69.8 at year-end).

Total investments for the first nine months amounted to SEK 4,419 million (3,368), including SEK 1,498 million (2,423) in tangible fixed assets, primarily fixed-line installations. The additional purchase price consideration for Sonera amounted to SEK 2,581 million. Other investments totaling SEK 340 million (945) were primarily attributable to capital infusions in subsidiaries and associated companies. Of the capital infusions to subsidiaries, SEK 46 million (829) was provided through debt conversion.

As of September 30, 2003, the number of employees was 3,002 (3,308 at year-end).

Financial Information/“Underlying” Measures of Results of Operations

This interim report includes information on “underlying” measures of TeliaSonera’s results of operations, such as “EBITDA excluding non-recurring items” and “Operating income excluding non-recurring items.” EBITDA equals operating income before depreciation, amortization and write-downs, excluding income from associated companies. Non-recurring items include write-downs, capital gains/losses, restructuring/phase-out of operations and personnel redundancy costs. TeliaSonera’s management uses operating income excluding non-recurring items as the principal measure for monitoring profitability in internal reporting. Management believes that, besides operating income, EBITDA excluding non-recurring items and operating income excluding non-recurring items are also measures commonly reported and widely used by analysts, investors and other interested parties in the telecommunications industry. Accordingly, these “underlying” measures are presented to enhance the understanding of TeliaSonera’s historical operating performance.

These “underlying” measures, however, should not be considered as alternatives to operating income as indicators of our operating performance. Similarly, EBITDA excluding non-recurring items should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. EBITDA excluding non-recurring items and operating income excluding non-recurring items are not measures of financial performance under IFRS/IAS or U.S. GAAP and may not be comparable to other similarly titled measures for other companies. These “underlying” measures are not meant to be predictive of potential future results.

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Forward-Looking Statements

This interim report contains statements concerning, among other things, TeliaSonera’s financial condition and results of operations that are forward-looking in nature. Such statements are not historical facts but, rather, represent TeliaSonera’s future expectations. TeliaSonera believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions; however, forward-looking statements involve inherent risks and uncertainties, and a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement, including TeliaSonera’s market position, growth in the telecommunications industry in Europe, the effects of competition and other economic, business, competitive and/or regulatory factors affecting the business of TeliaSonera and the telecommunications industry in general. Forward-looking statements speak only as of the date they were made, and, other than as required by applicable law, TeliaSonera undertakes no obligation to update any of them in light of new information or future events.

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